Wal-Mart sued over questions of private label craft beer authenticity

Dive Brief:

  • Wal-Mart is the target of a lawsuit that alleges the retailer’s private-label craft beer — which it has been selling since last year in about 3,000 stores, and claims to produce in collaboration with a Rochester, NY brewery — is a “wholesale fiction” and misrepresentation intended to deceive Wal-Mart customers into buying a higher-priced product they think is craft beer produced by a small U.S. brewer.

  • Though the beer is advertised as brewed by Rochester-based Trouble Brewing, a recent Washington Post report stated that no U.S. brewery by that name exists. “Government filings say the beer is actually made by WX Brands, and the address listed is for Genesee Brewing, which is based in Costa Rica,” the Post states. Genesee only maintains a business office in Rochester, NY.

  • The lawsuit was filed in Ohio, and according to Consumerist, the lead plaintiff is seeking to represent a class of Ohio residents who have bought the Trouble Brewing beers from Wal-Mart, "as well as compensatory and punitive damages for violations of the Ohio Consumer Sales Practices Act, fraud and unjust enrichment, and an injunction preventing further false and misleading advertisements regarding the beer."

Dive Insight:

The war against fake news may be just beginning, but the war against fake craft beer has been going on for a while. More than a year and a half ago, Men’s Journal published a list of so-called “faux” and corporate-owned craft brewers, hinting that these brewers and their owners were misleading consumers — although the facts behind the brands listed were in most cases easily available public information for anyone willing to take a closer look.

In Wal-Mart's case, there appears to be a bit more subterfuge going on, as the brewer it's partnering with isn't what it claims to be, or even where it claims to be based. Why is all this so important? The Brewers Association defines a craft brewer in part as one that is less than 25% owned by a larger beverage company, brews fewer than 6 million barrels of beer per year and makes its beer using traditional fermentation methods (non-fermented, flavored malt beverages do not qualify as craft beer.)

What the definition suggests, among other things, is authenticity, higher quality, limited availability (at least in some cases) and beer that is American-made by a small business. That sounds like beer that could be sold for a higher price than other more widely available, mass-produced beers, and craft beer often is priced accordingly. The lawsuit alleges that the "craft" beer Wal-Mart is selling fails to meet the requirements of that definition in multiple ways, yet the retailer is still selling it for the higher prices that are typical of many craft beers.

The details revealed in the Washington Post story position this as a pretty clear-cut case of misleading advertising, and the Brewers Association definition is part of that case. Yet one of the interesting side stories here is that the craft brewing industry, while still growing rapidly, is undergoing a huge amount of change. More craft brewers have been accepting investments or outright acquisitions from much larger firms. These deals may be testing the validity of the association's black-and-white definition, and we may find things are not so black and white after all.

For example, some of the brewers on the Men’s Journal list started as self-funded entrepreneurs in the early 1990s, a time when almost no one was funding breweries, almost no retailers, bars or restaurants offered small-brand beers, and almost no one actually drank craft beer. The story of the founding of Lagunitas, for example, is one of the most classic stories of a hard-working entrepreneur that you will ever hear: Founder Tony Magee represented basically every word that any small craft brewers would use to define themselves — authentic, local, quality-driven, creative, passionate, adventurous.

But as craft beer began to get much more popular in the last decade, Lagunitas grew in response to greater demand for its product. It outstripped the production-based definition of what a craft brewer is supposed to be, and eventually sold 50% of its business to international giant Heineken in a deal to get its beer into the hands of even more people. So, by Brewers Association definition, a Lagunitas beer is no longer a craft beer, but try telling that to Magee, the guy who started out by brewing beer by himself in his kitchen until his wife said he needed to go elsewhere. (Lagunitas beers, by the way, taste as good as they always have — being in bed with Heineken hasn't changed that.)

Are we saying Trouble Brewing is on equal footing with Lagunitas, and deserves further consideration? No. But the question of what really makes a craft beer a craft beer is more complex than it seems.

This is all a long way of saying it’s not so clear how this lawsuit will play out — and if it continues to proceed, how it will affect Wal-Mart’s beer buying and marketing practices, and Wal-Mart customers’ views of those practices. Intense fans of craft beers, the ones who will set aside a weekend afternoon to make a special trip to a distant bar or independent liquor store to taste a locally-produced, small-batch beer that isn’t available elsewhere, are not the same people who are buying their beer at Wal-Mart. Which would mean that, ultimately, this lawsuit is unlikely to damage Wal-Mart’s reputation or its bond with its most loyal customers.

Yet we are likely to see more lawsuits like this targeting retailers and marketers who play fast and loose with how they market beer. As a big fan of craft beer, I can tell you that small craft brewers almost never view one another in a competitive light, and that many of them have a pretty laid-back, fun-loving attitude about what for them involves long hours of very hard work. However, when it comes to the misrepresentation of craft beer by big breweries, big brands and big retailers, these small fry and their loyal followers can turn into a rabidly protective group.

Filed Under: Consumer Trends Marketing Corporate News
Top image credit: TheNerdPatrol